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Toby Clark, Mintel's senior finance analyst, said: "The good news is that the vast majority of people can still afford to make ends meet.

"But there has clearly been a deterioration in people's perception of their financial situation over the past two years, as rising interest rates and higher living costs have really started to take hold.

"As people look to make their hard earned cash stretch further, any company that can clearly show how it offers good value for money will be at a real advantage."

Mintel's research found that 46 per cent of adults still have outstanding unsecured (non-mortgage) debt.

With banks tightening their lending criteria, many people have been forced to turn to their credit cards to cover rising living costs, despite it being one of the most expensive ways to borrow money.

As a result the first four months of 2008 saw a 7 per cent rise in gross credit card lending compared to the same period in 2007.

The study also found that the number of people who have a financial safety net in the form of emergency savings has fallen from nearly half (43 per cent) in 2006 to less than a third (29 per cent) this year.

Mr Clark added: "Rising food and fuel prices combined with higher interest rates means that people are now having to find quite a bit more money each month to maintain their standard of living.

"And while some are clearly using plastic to cover the rising living costs and mortgage repayments, others are dipping into their savings. The savings ratio is also on the decline because for many there is simply nothing left in the pot at the end of the month to put away for a rainy day."

He said that although the housing market looked "bleak" there was a silver lining for those first-time buyers who had saved a deposit and who might soon be able to join the property ladder.